Working Paper No. 13-39:
Privacy and Antitrust: Underpants Gnomes, the First Amendment, and Subjectivity

Author(s):

Abstract:

Privacy
has begun to creep into antitrust discussions. In some ways, this should not be
surprising. Some of the largest and most ubiquitous companies, like Google and
Facebook, give away their services in return for consumer data. If information
about ourselves really is the price we pay for content, why shouldn’t antitrust
limit companies’ ability to collect and analyze consumer data? Although this logic has some facial appeal,
this paper identifies three major concerns with the inclusion of privacy in
antitrust analysis. First, the analogy between privacy and quality begins to
break down once we recognize that unlike selecting lower quality levels to
enjoy lower costs, firms invest in collecting and analyzing data to improve
content and to enhance matching between sellers and consumers, who have
heterogeneous tastes for privacy. Second, an antitrust rule that limits firms’
ability to collect and analyze consumer data is likely to raise some First
Amendment concerns. Third, allowing antitrust enforcers to consider privacy
would inject an undesirable level of subjectivity into antitrust enforcement
decisions, which is likely to attract socially wasteful rent seeking
expenditures and to deter beneficial data collection efforts.